Frankfurt (Oder) makes the most of its connections

Frankfurt (Oder) enjoys a favourable strategic location, within close proximity to Berlin and with access to both the German and Polish markets. Natasha Turak looks at how this, and its educational institutions, makes the small city when it comes to attracting investment.

Frankfurt an den Oder – not to be confused with Frankfurt am Main some 600 kilometres to its west, hence the designation Frankfurt (Oder) – offers more than meets the eye. The eastern German city, perched on the Oder river dividing Germany and Poland, is home to 57,000 people, and while fairly quiet on first glance, has fostered several innovative start-ups, crossborder ventures and unique business opportunities. This placid atmosphere, in fact, is what attracts many workers and families to the city, according to Frankfurt (Oder) lord mayor Martin Wilke.

Situated directly on the east-west transport route of the North Sea-Baltic Corridor that connects the eastern ports of the Baltic Sea with the ports of the North Sea, Frankfurt (Oder)’s location is at the very centre of Europe. Its place on the Trans-European Transport Networks and at the interface of western and fast-growing eastern European markets makes it a highly strategic destination for business.

A capital advantage

More than 1000 workers commute into the city from Berlin daily, making use of the 44 trains travelling between the two cities each day and the convenient one-hour journey time. Berlin is only 90 kilometres away and Berlin Schonefeld airport can be reached within a 45-minute drive.

Out of East Brandenburg’s 17,500-strong workforce, the region in which Frankfurt (Oder) is located, more than 13,000 people travel to the city for work. There is also a high volume of movement between Frankfurt (Oder) and its 'twin city' Słubice, directly across the Oder river in Poland, with which it shares many joint programmes and public services. This is set to grow, thanks to new investments and initiatives introduced by the private and public sector.

The city, and its surrounding East Brandenburg region, has seen its share of struggle, however. Its population has fallen by 30,000 since 1989, when German reunification following the fall of the Berlin Wall allowed people to move westward. Unemployment is at 11.9%, which has spurred the city and region to double down on its activity to make itself more attractive to investors, more innovative and more open to the world.

Frankfurt (Oder) was listed first in Germany by fDi Magazine’s German Cities of the Future 2016/17 ranking for cost efficiency – criteria examined included wage levels, low rents for office space and industrial real estate, and cheap costs for the local hotels. Additionally, Frankfurt (Oder) provides businesses with the highest investment reimbursement rates in Germany – something to consider particularly with respect to its proximity to Berlin – and touts its 'twin location' on the German-Polish border as a means to access two of Europe’s largest markets.

Knowledge incubator

A selling point of Frankfurt (Oder) is its specified technological expertise, the backbone of which is the Leibniz Institute for Innovations for High Performance Microelectronics (IHP). IHP develops silicon-based systems and radio frequency circuits and technology for broadband and wireless communication, and is involved in the aerospace, automation, security, biotechnology, medicine and automotive sectors. It employs more than 300 people from 23 different countries.

IHP researchers are currently working on systems by which data volumes of more than 100 gigabits per second can be transferred wirelessly over short distances, among other things. The local newsletter from investment promotion agency Investor Center Ostbrandenburg (ICOB) recently wrote that IHP turned heads in Silicon Valley, saying: “In San Francisco, IHP presented its ultra-fast silicon-based chip, which is twice as fast as other silicon semiconductors used for various production technologies at present.”

This means that IHP has broken a world record, leading the way in enabling such things as higher data rates for both wire-based and wireless communication systems, for example, for radar systems that can prevent car accidents.

It has also been praised for its engagement with local youth. It runs programmes with local schools and kindergartens to encourage participation in science, and offers a variety of apprenticeships for students with qualifications such as 'mobile apprentice' or 'apprentice meets science'.

Furthermore, IHP’s reach is international. As such, it has brought attention to Frankfurt (Oder) through partnerships and collaborations with global technology groups including IBM, Philips, Cisco and more. And, as it has a venture with SpaceTech in avionics for satellite systems, it could even be said that its reach is extraterrestrial.

On the radar

While a large organisation such as IHP plays a flagship role in Frankfurt (Oder), its spin-offs are equally noteworthy. Silicon Radar, a Frankfurt (Oder) start-up that is developing radar sensors, is one of these. Just in 2016 the company was awarded a 'future prize' for the State of Brandenburg for its innovative product developments. Its sensors are used to advance technology for industry and develop applications in robotics, drones and more.

“Due to their miniaturisation, low power consumption and precision, these chips have become market leaders worldwide,” says the Frankfurt (Oder) newsletter. With more than 100 international customers and an annual turnover of €1.5m, the small team is a proud success story for the city.

Founded a decade ago by two researchers at IHP, Silicon Radar now employs 20 people from nine different countries including Turkey, Ukraine and Bangladesh. Many of its research projects receive funding from the European Commission.

“We depend on IHP,” says Anja Bölicke, Silicon Radar’s managing director. “We have contracts in place to use its equipment, and it is one of our most important customers and our most important supplier.” IHP also has an active PhD programme, so the start-up makes the most of that talent for potential hires. However, Ms Bölicke admits: “It is not easy to convince people from other regions of Germany to come here.”

Nonetheless, the venture continues to reach to new heights, proving that size does not always matter, particularly in the tech field. “We are by no means an elitist company,” says Ms Bölicke. “Our interest is in everyday applications."

Satisfied customers

Frankfurt (Oder)’s largest foreign investor also credits IHP for much of its success. Astroenergy Solarmodule, a subsidiary of Chinese energy giant Chint Group, makes solar panels for the European market with an annual revenue of €130m. The group established itself in Frankfurt (Oder) through the acquisition for only €6m of a former German photovoltaics company that had gone into administration.

“It was very important to be close to IHP, because IHP is very experienced in site production and is a source of a lot of technology and equipment,” says Dietmar Gutzmer, director of business administration at Astronergy. His colleague Dong Chen agrees on the location’s convenience. “Frankfurt (Oder) is in a key position between the east and west of Europe from a logistics point of view. And we already got the production facility and employees [in the acquisition], many of whom come from Berlin,” he says.

Astroenergy has seven solar module production facilities and 3000 employees worldwide, with 250 of those employees in Frankfurt (Oder).

Gateway to the east

While demographics may change over time, geographic position does not, and this works well for Frankfurt (Oder), which is marketing itself as a German 'gateway to the east'. Making use of this is Bernd Meewes, director of Polish cargo terminal operator PCC Intermodal.

“Our trains are coming from all of Poland and the Brandenburg area to Frankfurt (Oder) and going to Hamburg, Antwerp, Rotterdam – so Frankfurt (Oder) is connected to all the main European ports,” says Mr Meewes. The four-track terminal handles more than 60,000 containers-worth of cargo each year.

“It takes about 14 hours to get to Rotterdam [from Frankfurt (Oder)],” he says. “Our cargo is oil, gasoline, flooring, materials. About 400 to 500 containers come through per day. Frankfurt (Oder) is connected as well with Belarus and further east to China – the trains here can go all the way to China on the freight routes.

“We invested about €1.5m just in the terminal,” he adds, referring to a private-public project between PCC Intermodal and the City of Frankfurt (Oder), the German government, and the EU. The venture aims to upgrade the cargo terminal in Frankfurt (Oder)’s Freight Village, which dates back to 2004.

Total investment is €10m and the terminal’s current annual turnover is €500m. PCC Intermodal itself has 10 facilities across Germany and Poland, with 200 employees in Germany and 16 in Frankfurt (Oder).

Handling operations at the terminal have reached an all-time high thanks to new transport routes via the land bridge from China to Europe, which is used as an alternative to sea transport. Because of this growth, construction plans are already being drawn up for a seven-hectare logistics centre next to the terminal.

“There are no problems with laws in Germany or Poland,” says Mr Meewes says. “All the authorities are supporting us as well. The laws are complex in Germany, but we are really fine.” PCC Intermodal has invested an extra €2m to €3m for new equipment, he adds, saying: “Frankfurt (Oder) is directly in the middle of our network, and the city is supporting us very well, so we decided to take over this terminal and we’ll be here for the next 25 years for sure.”

Room for manufacturing

An inadvertent benefit of Frankfurt (Oder)’s now reduced population is the amount of land available for companies setting up – particularly in manufacturing, where operations require substantial space. Land is also cheap. Prices on industrial estates start at €10 per square metres, and investors are offered direct cashback incentives for labour or investment costs, as well as credit sureties and subsidies for R&D projects.

TeGeCe technology park is a cluster that provides these benefits, along with all necessary infrastructure, such as fully developed industrial areas equipped with water supply, waste disposal, gas lines and more. The park is home to more than 50 companies, German and international, and employs about 3000 workers.

One of TeGeCe’s tenants is Japanese electrical components manufacturer Yamaichi, which employs 150 people in the tech park. It is currently investing in the construction of a new 6000 square metres factory in Frankfurt (Oder) on a greenfield surface area of three hectares. “Commencing operations in the middle of 2019 is a realistic goal. The city is proving extremely cooperative,” says Helge Puhlman, European president of Yamaichi Electronics. The building will also include a training facility for apprentices to learn highly technical skills.

German industrial manufacturing and engineering firm WEFO Tec is constructing its first production hall in Frankfurt (Oder), which, when completed at the end of 2017, will encompass 3900 square metres and include space for offices, sales, administration and maintenance. A second production hall is already being planned. WEFO-Tec’s initial investment of €25m will generate 50 jobs.

“The company plan is for its new site to cover the entire value-added chain for the production of injection-moulded parts for industry, including development, design, tool construction, parts production, procurement and assembly construction,” says the ICOB newsletter.

Manfred Boguslawski, WEFO Tec’s managing director, says: “Our investment project is planned in different stages. Ultimately, our aim is to build a complete production line for plastic parts and assemblies with focus on sustainability, energy and environmentally friendly aspects throughout the process and the design of the entire production facility."

Besides engineering components and plastics, Frankfurt (Oder) is also home to the Frankfurter Brauhaus brewery, which won a federal prize of merit from the German Federal Ministry for Nutrition and Agriculture in 2015. The company“took over the Gilde brewery in Hanover, which previously belonged to the US brewery group Anheuser-Busch Inbev.

Frankfurter Brauhaus’s packaging company in Frankfurt (Oder) also has three production lines for PET bottles, and lines for keg and glass bottle production. The 200 or so employees at the Frankfurt (Oder) facility brew some 2.5 million hectolitres of beer a year for markets in Germany, Poland, Slovakia, the Czech Republic and Hungary.

Road to China

Chinese companies have increasingly shown interest in Frankfurt (Oder)’s manufacturing potential and amenable business environment, and in December 2016 Chinese plastics manufacturer YT Global Precision Leader chose the German city for its first foreign branch, Ying Tong Industrial. It will serve as a logistics hub for its European customers, and is expected to also provide a base for individual production and sales. Headquartered in Dongguan, China, the company has 380 employees globally and an annual revenue of $15m.

Serving a global market with customers in the US, Asia and Europe, YT Global produces “business-to-business solutions for injection-moulded products in the fields of medical technology, computers/electronics, household appliances, automotive and office and measurement technology”, according to a press release on the investment decision. Emper Bao, general manager of both the Chinese and German companies, says: “Frankfurt (Oder) offers ideal logistical conditions to get closer to our customers and deliver the products exactly as they are needed. The decisive factor was the professional support and the open manner in which we were received here. Frankfurt (Oder) is not a metropolis, but the people we have dealt with so far are internationally oriented and have shown great interest and attention to us.”

Astroenergy’s parent, Chint Group, recently signed a letter of intent with political and business representatives of Zhejiang province for the construction of a European logistics centre for Chint on the grounds of the Astroenergy facility.

Representatives from Zhejiang have visited Frankfurt (Oder), including the largest TV broadcaster from the Chinese province. The investment for the Chinese group is strategic, as the country’s New Silk Road project aims to increase connections to Europe and central Asia via railways and logistics terminals.

Something old, something new

A compelling argument can be made that no investment destination is complete without a university, preferably several. The European University of Viadrina, founded in 1506, has an interesting history. Its faculty was moved to present-day Wrocław, Poland, in 1811 during the Napoleonic wars and the Frankfurt (Oder) buildings were shuttered. Also referred to as the University of Frankfurt (Oder), the campus reopened in 1991 and now is home to 6500 students from more than 90 countries.

While one of the smallest universities in Germany, it works to show that, like its home city, size is not all that matters. Viadrina offers 24 study programmes and more than 20 international double degrees for both undergraduates and graduates, as well as foreign exchange and research partnerships with 263 universities around the world. The university was recently ranked among Germany’s top six universities for business administration, and has a specific focus on European and international law, economics and culture.

Having in past years won the first prize in the Innovationsbank Berlin think-tank university rankings, the small institution has shown itself to be one of the most promising universities for start-ups in the state of Brandenburg.

“The Viadrina entered the competition with no less than 36 ideas for start-ups for the Berlin‐Brandenburg region, Germany and Europe, ranging from a learning aid app to services in childcare and solutions for sustainable, nutritionally aware catering,” says the ICOB newsletter. And Viadrina’s Centre for Entrepreneurship and Research provides guidance and support for start-ups, helping to ensure valuable talent stays in the city beyond graduation.

“The university is growing, and a new faculty is preparing a German-Polish faculty, which means the university is making the location more and more international,” says Frankfurt (Oder) mayor Mr Wilke. “We need more income and more taxes, and for that we offer a lot of advantages for companies. It’s a win-win situation. We offer the surroundings and the right circumstances and, on the other side, we hope for more growth and more jobs.”

Costs of this report were underwritten by Investor Center Ostbrandenburg. Reporting and editing were carried out independently by fDi Magazine.

Corporate location benchmarking tool

fDi Benchmark is the only online tool to benchmark the competitiveness of countries and cities in over 50 sectors. Its comprehensive location data series covers the main cost and quality competitiveness indicators for over 300 locations around the world.